Wayne, was Rappa really a profitable investment?
>>Robert, Rappa has been a profitable investment:
>>The deal is supposed to bring pretax proceeds of approximately $3,400,000 ($2,100,000 in cash and about $1,300,000 in common shares of the waste management company) from a 1996 investment of $1,800,000.
>>That is 89% gain using these figures (which could even be conservative estimates).
It would be interesting to clarify how management arrive at the $1,800,000 investment cost. From the March/97 news release, the company said:
"Antares is pleased to announce that it has signed an agreement with
a subsidiary of The Standard Bank of South Africa Limited, under
which Antares' beneficial interest in South African based Rappa
Holdings (Proprietary) Limited, will increase from 24.75% to 50%.
In addition, negotiations are proceeding with the objective of
Antares further increasing its Rappa ownership.
"The purchase price includes a cash payment of CDN$3,700,000, the
refinancing of CDN$1,200,000 of subordinated debt and 2.179 million
Antares common shares. The transaction is subject to financing and
regulatory approvals."
Questions:
1. What was paid for the original 24.75% ownership?
2. How is the $1,800,000 net cost arrived at?
3. What has happened or will happen to the 2.179 million common shares
which apparently was part of the purchase price to up the ownership
to 50%
4. Why the change in management strategy, and selling of Rappa now. Only a year ago, this purchase was supposed to be a smart way of ensuring dependable cash flows to the company.
Also, Wayne in your calculations, you've assumed the common shares of the privately held waste management company is worth $1.3 million. Since the waste management company is a privately held company, there is no certainty at this time to pin-point what the real value is.
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